How to solve

Instructions:

Read the problem below and refer to the spreadsheet provided. The spreadsheet values highlighted in yellow can be manipulated in order to determine possible outcomes and answer the questions. You must answer the follow$-$up questions $($a$-$e$)$ correctly to receive full credit.

Problem:

Marko, Inc.$\text{'}$s managers are comparing the profitability of a target marketing strategy with a mass marketing "strategy." The spreadsheet gives information about both approaches.

The mass marketing strategy is aiming at a much bigger market. But a smaller percent of the consumers in the market will actually buy this product$-$because not everyone needs or can afford it$.$ Moreover, because this marketing mix is not tailored to specific needs, Marko will get a smaller share of the business from those who do buy than it would with a more targeted marketing mix.

Just trying to reach the mass market will take more promotion and require more retail outlets in more locations$-$so promotion costs and distribution costs are higher than with the target marketing strategy. On the other hand, the cost of producing each unit is higher with the target marketing strategy$-$to builfd in a more satisfying set of features. But because the more targeted marketing mix is trying to satisfy the needs of a specific target market, those customers will be willing to pay a higher price.

In the spreadsheet, "quantity sold" $($by the firm$)$ is equal to the number of people in the market who will actually buy one each of the product$-$multiplied by the share of those purchases won by the firm's marketing mix. Thus, a change in the size of the market, the percent of people who purchase, or the share captured by the firm will affect quantity sold. And a change in quantity sold will affect total revenue, total cost, and profit.

Spreadsheet

The spreadsheet values outlined in yellow can be changed in order to determine possible outcomes. You can find the initial values in the corresponding blue cells in columns E and F$.$ Start by entering the initial values into columns B and C$.$ Then review the questions below and adjust the values in columns B and $C$ to determine the correct answers.

Spreadsheet

The spreadsheet values outlined in yellow can be changed in order to determine possible outcomes. You can find the initial values in the corresponding blue cells in columns E and F$.$ Start by entering the initial values into columns B and C$.$ Then review the questions below and adjust the values in columns B and $C$ to determine the correct answers.

$\backslash$table$[[,$A$,$B$,$C$,$D$,$E$,$F$],[1,,,,,,,$Initial,,Initial$],[2,,,$Targeting,,marketing,,Targeting,,marketing$],[3,$Product: Production cost per unit,$$,8\mathrm{.}00,$$$,7\mathrm{.}50,,$$ $8\mathrm{.}00,$$$,7\mathrm{.}50],[4,$Place: Distribution cost per unit sold,$$,2\mathrm{.}00,$$$,2\mathrm{.}50,,$$ $2\mathrm{.}00,$$$,2\mathrm{.}50],[5,$Promotion: Total promotion cost,$$,12,000\mathrm{.}00,$$$,60,000\mathrm{.}00,,$$ $12,000\mathrm{.}00,$$$,60,000\mathrm{.}00],[6,$Price: Selling price per unit,$$,16\mathrm{.}00,$$$,14\mathrm{.}00,,$$ $16\mathrm{.}00,$$$,14\mathrm{.}00],[7,$Overhead costs,$$,10,000\mathrm{.}00,$$$,20,000\mathrm{.}00,,$$ $10,000\mathrm{.}00,$$$,20,000\mathrm{.}00],[8,$Number of people in the market,,,,,,$25,000,,275,000],[9,$Percent of people who will buy,,,,,,$80\mathrm{.}00\%,,40\mathrm{.}00\%],[10,$Firm's percent $($share$)$ of purchases,,,,,,$50\mathrm{.}00\%,,20\mathrm{.}00\%$